"Institutional Voids, Avoidance Response and Foreign Listing"

Abstract

As a surging phenomena, foreign listing has been explained by the financial motivation to reduce capital cost and strategic motivation to seek overseas opportunities. This paper has taken a new perspective to explain foreign listing from the pushing effect of home institutional voids. In the context of emerging economies, this article proposes that some firms can make advantage of institutional voids, while firms are hurt by institutional voids. Foreign listing is a partial avoidance response by firms to create a more favorable set of institutions. Using a sample of listed firms from China, the study shows that firms with relation-based capabilities are less likely to go foreign listed, and firms with market-based capabilities are more likely to foreign list. Furthermore, we consider the unbalanced development of subnational institutions in emerging economies, and explore the moderating role of subnational institutional development.